News and Updates

HOW A SMALL TOWN EMPLOYEES’ CO-OP IN AKLAN MADE ITS MILLIONS

March 7, 2018

AKEMPCO shares best practices to sustain community-owned ventures

LEZO, Aklan—Successful cooperatives are all alike; unsuccessful cooperatives fail in their own way. For the Akelco Employees Multipurpose Electric Cooperative (AKEMPCO), it’s all about managing expectations and getting its priorities straight.

It has been 15 years since this employees’ co-op of the Aklan Electric Cooperative, Inc. (AKELCO) was established and until now, its members continue to live by the classic business mantra of their founding fathers: do more with less, or better yet, make some with none.

Someone who is unfamiliar with the concept will probably shake his head in confusion. What can you possibly expect to produce out of nothing? It’s a legitimate question that seems to have no logical answer but, in a cooperative environment, this is a problem easily solved.

STARTING SMALL

Cooperatives thrive when economic democracy is established and this applies to AKEMPCO as well. Its pioneers, consisting then of only 42 regular AKELCO employees, decided to help each other out by forming a new organization that is flexible enough to serve their varying needs.

According to AKELCO general manager Engr. Alexis Regalado, who worked as the founding chairman of the co-op for seven years, they started it in 2002 under the leadership of Mr. Edgardo Masongsong, now the National Electrification Administration (NEA) chief.

Masongsong has been credited as the one who launched the employees’ cooperative for AKELCO in his capacity then as member of the NEA-backed management team that was tasked to rehabilitate the power distribution utility during its ailing years.

The objective was to promote an initiative on workers’ empowerment. To set AKEMPCO in motion, Regalado said they raised P5,000 as initial capital through an automatic P50 deduction from their monthly salaries at the time.

Their pooled resources plus a P50,000 donation from AKELCO were then used to fund a microlending business venture. This became their original enterprise, ticking off the first mission they have set for themselves: to develop an organizationally and financially viable co-op.

Under a usufruct agreement, AKEMPCO converted a 10-square meter old guard house into a small office inside the distribution utility’s compound in Lezo to begin processing loan applications from its member cooperators.

They initially offered regular loans ranging from P10,000 to P50,000 during its first five years. Members could also borrow P5,000 to P10,000 in cases of emergency and other short-term loans (e.g. miscellaneous trading, appliance, vehicle, petty cash, etc.) have been introduced.

The amounts later on increased when they extended flexi loans between P100,000 to P300,000 at low interest rates. Soon, the once fledgling co-op attracted more people, bringing its official membership count to 294 as of late 2017, including former and retired AKELCO employees.

The organization likewise added a small grocery store and a catering service among their business undertakings, plus a franchise of Phoenix gasoline station at Toting Reyes, St. in Kalibo, which they acquired last year.

In less than two decades, AKEMPCO stretched its working capital to P16.117-million, and they now find themselves staring at more than P40-million in total assets. How did this happen? Of course, not overnight.

OVERCOMING CHALLENGES

The current AKEMPCO executives said it is a combination of sound operational management backed by strategic business decisions. They were able to finance a number of loans all at once through proper facilitation of outsourced funds.

Chief among their rivals are the banks moving in town that are way more capable of providing bigger loans. But instead of getting intimidated by their presence, they looked at these financial institutions as potential partners.

In 2014, a time when AKEMPCO was reeling from a series of major setbacks, its officers turned to the United Coconut Planters Bank-Coconut Industry Investment Fund (UCPB-CIIF) to help finance the P10-million required capital for their flexi loan program.

“We need to look for [banks] that have low interest rates to outsource [those funds] so it would appear that our word is our only capital,” said board member Gary Masigon, who has been with co-op for 11 years and counting.

In streetsmart lingo, this is what Pinoys would refer to as “laway lang ang puhunan;” in business terms, it’s called leverage. “We are not shelling out cash…” Masigon said. “But we still make a profit [in the process],” AKEMPCO general manager Anna Tamayo added.

This strategy helped turn things around in the co-op after enduring some financial struggles in 2013 due to mismanagement issues. Securing a bigger funding has kept AKEMPCO afloat as it was able to match the loanable amounts that most banks would extend.

Masigon revealed they are in fact going to further increase their flexi loan program up to P500,000—still at low interest rates and with longer repayment period—just to remain competitive. “We need to keep up with what the banks are offering so our [borrowers] would stay with us,” he said.

The AKEMPCO officers also left no room for errors during their recovery period and began hiring new people to revitalize their operations. Tamayo was recruited to fill the general manager position, which was vacant for quite some time, to focus on the expanding activities of the co-op.

Learning from experience, incumbent AKEMPCO chairman Francis Ramos II said they intend to add more personnel in the future to help them run their other businesses. The hiring of an accounting clerk for their gas station will be introduced this April when they hold their general assembly.

“We need another person for that [fuel station business] because we know Ma’am Anna cannot handle everything. We also grant rebates to our accounts there because that is the only way we can hold them [as regular customers] so we have to monitor that as well,” Ramos explained.

Despite expanding into other ventures, however, Masigon said granting loans to their co-workers in need is still their top priority because “the return of investment is quick and the expenses are not that heavy on people.”

“Our [money] lending [service] is considered as an everyday need of our members—the availability of the loans—so we really need to put funds in it. We cannot sacrifice that window because that is where we receive immediate returns,” Ramos added.

DREAMING BIG

Nevertheless, AKEMPCO is not closing its doors on every possible opportunity for growth. Its officers are currently toying with the idea of putting up a budget friendly hotel in Boracay, the eco-tourism hub of Aklan, per the suggestion of their biggest shareholder, Engr. Regalado himself.

Regalado said AKELCO has a vacant lot in Boracay, which it offered for development to AKEMPCO, also under usufruct. He encouraged them to build a mid-range hotel enough to accommodate casual travellers to the island or serve as venue for company seminars and other events.

Ramos and his colleagues have all expressed interest in his proposal but they wanted it to go through a comprehensive evaluation first. Also, the AKEMPCO execs said they prefer to acquire the property itself and not through usufruct so they can own all the rights to it.

Masigon likewise noted that a hotel investment would require sizeable sums of money as capital, especially in Boracay where lands are priced three times higher than the average. “The plan is great but let’s put it under feasibility study first,” he said.

They are also exploring other options, including a franchise of a popular convenience store that could double as an outsource payment collection center for AKELCO, or adding another gasoline station.

“We are open for suggestions, especially if we can count on the NEA for support,” Ramos said. The AKEMPCO officials, nonetheless, indicated that they are not going to hastily embark on other projects if it would put the funds intended to support the welfare of their members at risk.

Despite having a P40-million asset at their disposal, and even if they are at liberty to outsource funds from the banks, Ramos said every proposed business venture must have the consent of the majority before it pushes through.

This is perhaps what sets AKEMPCO apart from other enterprises. It is always conscious about putting service to its people first before profit. When asked how much, in terms of dividends, does each member receive from their overall transactions, the co-op officials had this answer:

“We do not put that much emphasis on dividends because we would rather keep our interest rates low so more people could avail our financial services. While the dividends may be minimal, at least the benefits redound to all our members. To us, that is more important.”

As distribution utilities, electric cooperatives operate under the same principles and processes. Only somehow they differ in management styles with the kind of strategies they employ, which reflect on their performances that determine their measure of success. ###